CERNAVODA, Romania — A row of hulking concrete domes loom along the Danube-Black Sea Canal in Cernavoda, about two hours east of Bucharest. Two of the structures house nuclear reactors feeding Romania’s electrical grid.Two others were begun decades ago and are still waiting for completion — though, perhaps, not for long.
“We have major plans,” said Valentin Nae, the site director.
The nuclear complex was conceived during the regime of Nicolae Ceausescu, the Communist dictator who ran Romania for a quarter century before he was overthrown and executed in 1989. Mr. Ceausescu’s strategy was to insulate Romania from the influence of the Soviet Union by having it generate its own electricity.
More than 30 years on, as much of Europe looks to cut ties to Russia’s energy, Romania is benefiting from Mr. Ceausescu’s thinking. The two reactors very cheaply supply about 20 percent of Romania’s electricity.
Russia’s invasion of Ukraine, which shares a nearly 400-mile border with Romania, has strengthened Romania’s push for energy independence. Its ambitious energy plans include completing two of the Cernavoda plants and leading the way into a new type of nuclear technology called small modular reactors. It also wants to take full advantage of substantial offshore gas fields in the deep waters of the Black Sea.
Two reactors at Cernavoda meet about 20 percent of Romania’s energy needs. The long-delayed completion of two more reactors there is in the works. Credit…Andreea Campeanu for The New York Times
Some see Romania, a nation of 21 million roughly the size of Oregon, as having the potential to become a regional energy powerhouse that could help wean neighbors in eastern and southern Europe from dependence on Moscow. It is a goal shared in Washington and among some investors, who see business and strategic opportunities in a corner of the world that has flared hot in recent months.
The owner of the Cernavoda nuclear complex, a state-controlled company called Nuclearelectrica, plans to spend up to 9 billion euros ($9.5 billion) on nuclear initiatives this decade.
“For Romania, I will definitely tell you, these projects are super important,” said Cosmin Ghita, Nuclearelectrica’s chief executive. Mr. Ghita said nuclear power could help Romania achieve a variety of goals, from reducing carbon emissions to “countering Russian aggression in the region” on energy matters.
The war in Ukraine has created momentum to break years of stalemate and step up drilling in the Black Sea to unlock potentially rich troves of natural gas that Romania could export.
“We will supply energy security for the neighborhood,” Virgil-Daniel Popescu, Romania’s energy minister, said in an interview after lawmakers passed legislation designed to encourage investment in gas production.
Yet working in Romania will probably prove to be a challenge for companies from the United States and other Western countries. The government has a reputation for greeting outside investors with cumbersome taxes and heavy-handed regulations. These policies, perhaps a result of fears that Romanian consumers would end up paying too much as energy giants took home hefty profits, have probably driven outside companies away.
Last month, for example, Exxon Mobil sold its 50 percent stake in Neptun Deep, a Black Sea project that had been heralded as potentially the largest new natural gas production field in the European Union. Exxon’s brief announcement said the company wanted to focus on projects with “a low cost of supply.” Romania’s tax regime is considered Europe’s toughest.
Romania’s petroleum industry is one of the world’s oldest, dating to the drilling of wells as far as back the 1860s and centered on the vibrant hub of Ploiesti, about 35 miles north of Bucharest. While the venerable oil fields are on the wane, industry executives say drilling in the Black Sea could produce enough natural gas to turn Romania, now a modest importer, into the largest producer in the European Union.
“The opportunity resides in the offshore,” said Christina Verchere, chief executive of OMV Petrom, Romania’s largest oil and gas company.
Romania also has dams generating nearly 30 percent of the country’s electricity. And the nuclear industry, employing around 11,000, receives high marks from the global industry.
“They are a terrific operator; they know what they are doing,” said Carl Marcotte, senior vice president for marketing and business development at SNC-Lavalin, a Canadian company that owns the Cernavoda reactor technology and is involved in the upgrade.
This potential has drawn the interest of the United States. In 2020, with encouragement from the Trump administration, Romania broke off negotiations with China to complete the reactors at Cernavoda and turned to Washington as its main source of nuclear support.
While plans for Cernavoda are grinding forward, the Romanian government and the Biden administration announced in May a preliminary agreement to build a so-called small modular reactor at the site of a shuttered coal-fired power plant.
The provider would be an Oregon company, NuScale Power, which has received more than $450 million in support from Washington to develop what the nuclear industry hopes will be a new technology to revive reactor building.
The idea is to build components for the plants in factories and then assemble them at the site with the hope of cutting the enormous costs and long construction times that have hampered the nuclear industry. Over time, these reactors could provide European countries with an alternative to polluting coal and imported gas from Russia.
“Europe must find trusted sources of clean and reliable energy, sources free of coercion and malign political influence,” said David Muniz, the chargé d’affaires at the U.S. Embassy in Bucharest, at a news conference announcing the NuScale deal.
For a country like Romania with a well-trained, low-cost work force, experts say, making equipment for this new type of reactor could turn into an export industry, not to mention the chance to export surplus electricity.
“I believe it is an immense opportunity,” said Ted Jones, senior director for strategic and international programs at the Nuclear Energy Institute, an industry group in Washington.
The Russia-Ukraine War and the Global Economy
A far-reaching conflict. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes. The conflict has caused dizzying spikes in gas prices and product shortages, and has pushed Europe to reconsider its reliance on Russian energy sources.
Global growth slows. The fallout from the war has hobbled efforts by major economies to recover from the pandemic, injecting new uncertainty and undermining economic confidence around the world. The Organization for Economic Cooperation and Development warned that the war was fueling rapid inflation; world growth is expected to slow to 2.9 percent this year from 5.7 percent in 2021.
Energy prices rise. Oil and gas prices, already up as a result of the pandemic, have continued to increase since the beginning of the conflict. The sharpening of the confrontation has also forced countries in Europe and elsewhere to rethink their reliance on Russian energy and seek alternative sources.
Russia’s economy faces slowdown. Though pro-Ukraine countries continue to adopt sanctions against the Kremlin in response to its aggression, the Russian economy has avoided a crippling collapse for now thanks to capital controls and interest rate increases. But Russia’s central bank chief warned that the country is likely to face a steep economic downturn as its inventory of imported goods and parts runs low.
Trade barriers go up. The invasion of Ukraine has also unleashed a wave of protectionism as governments, desperate to secure goods for their citizens amid shortages and rising prices, erect new barriers to stop exports. But the restrictions are making the products more expensive and even harder to come by.
Food supplies. The war has driven up the cost of food in East Africa, a region that depends greatly on exports of wheat, soybeans and barley from Russia and Ukraine. and is already dealing with a severe drought. Western leaders, meanwhile, have accused Russia of weaponizing global food supplies with its blockade of Ukrainian grain.
Prices of essential metals soar. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
Yet the Romanian government is likely to keep close watch on investors and try to insulate Romanians from global economic forces. Outside of the faded elegance of some districts of Bucharest, Romania is a relatively poor country, its median income ranking near the bottom in the European Union.
“There is an ingrained mistrust in the private market,” said Radu Dudau, director of the Energy Policy Group, a nonprofit in Bucharest. “There is an underlying understanding and expectation that the people and the nation will be safer if the state controls it.”
Such principles appear to have been at work in 2018 when the government raised taxes and imposed export restrictions on offshore petroleum production. Exxon followed that move by putting up for sale its share of the Neptun field, believed to hold tens of billions of dollars’ worth of gas. On May 3, Exxon said it would sell its share to Romgaz, a state-controlled firm, for about $1 billion.
If development of the project had gone ahead in 2018, Romania would perhaps be close to nearly doubling its current gas production. Instead, at best, the project isn’t expected to come onstream for another five years. The government’s moves “significantly undermined the competitiveness of Romania’s offshore for investors,” said Ashley Sherman, research director for Caspian and Europe at Wood Mackenzie, an energy consulting firm.
Mr. Popescu, the energy minister, said the sponsors of the 2018 legislation had misjudged, figuring that Exxon would proceed with the project anyway, and had been proved wrong by “real life.” Recently, with energy security much higher on the agenda, lawmakers passed legislation to repair the damage and ease some of the rules. Soaring natural gas prices and the war in Ukraine persuaded lawmakers that they had to “start exploitation of the Black Sea,” he said.
And soon, a smaller gas field in the Black Sea is expected to start operating. Owned by a group including a unit of Carlyle, the U.S. investment management firm, the project is close to piping fuel ashore near Constanta, Romania’s major port and offshore drilling center. It will produce about 10 percent of Romania’s gas needs.
Developing Neptun, estimated at $4 billion, is likely to be more difficult and expensive than if the work had begun a few years ago. With high oil and gas prices, costs of drilling and steel and other inputs have soared. The Black Sea is a risky area now with mines floating around and the perils from Russian military activity adding to insurance rates. Exxon also has far greater expertise in operating in deep water than Romgaz or OMV Petrom, which has taken over from Exxon as operator of the project.
Despite those issues, concerns over energy security are so strong that the project seems likely to go ahead, even with Exxon gone, analysts say. It may even help that two Romanian companies are in charge.
“I think it definitely has the right context now,” Ms. Verchere, the OMV Petrom chief executive, said.
